The Bureau of Labor Statistics (BLS) today reported an unemployment rate of 2.9% for November, an increase of 0.1 percentage points from October.

Older workers are benefiting from a historically low unemployment rate. Now is the time to prepare for older workers’ higher risks in recessions.

Older workers least prepared for retirement are most likely to end up jobless in a recession. During the Great Recession, 16.1% of older workers without retirement plan coverage lost their jobs and either remained unemployed or retired involuntarily. Those with coverage fared better - 10.7% of those with a 401(k)-type defined contribution (DC) plan and 8.5% of those with a defined benefit (DB) plan were unable to find a new job.

Even workers on track for a secure retirement aren't out of the woods. If they lose their job, they likely stop saving for retirement and may have to draw down assets prematurely, putting them at risk of outliving their wealth.

To protect older workers from the effects of unemployment or involuntary retirement, including downward mobility and poverty, we need to ensure workers have bargaining power. Bargaining power allows older workers time to seek a good job, negotiate better pay and working conditions, or choose to take a dignified retirement.

*Arrows next to "Older Workers at a Glance" statistics reflect the change from the previous month's data for the U-3 and U-7 unemployment rate and the last quarter's data for the median real weekly earnings and low-paying jobs.

The Bureau of Labor Statistics (BLS) today reported a 2.8% unemployment rate for workers age 55 and older in October, which reflects no change from September. The headline rate remains near a record low, as it has for a year.

Despite reports of a hot job market for older workers, older Americans are not being lured back to work. At a time when economists would expect new entrants* to the labor force to be increasing, the share of new workers in the older workforce fell last month by over half from the beginning of 2018, from 2.5% in January to 1.0% in September.

The drop in new entrants could mean the labor market has absorbed almost all the older people who want a job. That would be good news, but our evidence points in another direction. The share of older people who want a job but don't have one (ReLab’s U-7) has not recovered to pre-recession lows. At 7.4%, U-7 is 0.8 percentage points higher than the pre-recession low of 6.6%. Even for the college educated, U-7 is 6.8%.

There are two main reasons why older workers are not entering the labor market. First, older Americans, especially older women, face age discrimination in the hiring process, which discourages job search. Second, most jobs created in the recovery have been low-paying, low-quality jobs, including contingent and alternative jobs.

This evidence does not support the belief that the retirement crisis can be solved by working longer. To ensure workers can retire in dignity, policymakers should expand Social Security and create Guaranteed Retirements Accounts (GRAs). GRAs are universal, secure retirement accounts funded by employer and employee contributions throughout a worker’s career paired with a refundable tax credit. These policies will help prevent downward mobility in the event of involuntary retirement.

*New entrants are defined as those previously not working who found a job in the last year.**Arrows next to "Older Workers at a Glance" statistics reflect the change from the previous month's data for the U-3 and U-7 unemployment rate and the last quarter's data for the median real weekly earnings and low-paying jobs.

A persistent story about Social Security, greedy baby boomers, and badly-treated younger people periodically rises from the grave. But the story is false. I hope that my shining the light of facts can help kill this false story. Spending on the elderly does not displace spending for younger populations. Societies that care about vulnerable people, regardless of their ages, are more generous.

My study of 58 nations over 30 years shows that nations that are generous to their elders also are generous to children. The link is especially strong between good treatement for female elders and poverty programs directed at kids and education spending. In caring socieites, pension and education spending increase together, suggesting that when political forces ally the elderly and young families, social spending increases across groups. A 10% increase in spending on education (as a percent of GDP) is correlated with a 7.3% increase in spending on pensions. It seems nations making the political decision to enhance the lives of the old also do so for the young.

But if it isn't greedy geezers, what are the policies and trends that are really hurting young workers? We can see the trends clearly: stagnating wages, rising debt, and high housing costs.

Economist Dean Baker and the Economic Policy Institute (EPI) note the wages of a typical worker have barely risen in four decades, especially for men. So there are low prospects for a career with regular wage increases. EPI shows that in 2013, inflation-adjusted hourly wages of young college graduates were lower than they were in the late 1990s.

And college completion is no magic bullet. Low and stagnant wages affect even those with four-year college degrees. And many recent college grads and people who took out loans but never finished a degree are having to finance more loans as a percentage of income, than young people have ever done before.

Also housing costs in large cities where economic growth is strong and where young people go to find work are at record highs. Housing cost increases are easily outpacing inflation in many cities, making life especially hard for low- and moderate-income households and for first-time home buyers.

So a lopsided and lackluster labor market, debt, and housing costs are the main problems facing the children of boomers, not their allegedly greedy parents. In fact, adequate Social Security and Medicare are a gift to Millenials and Generation Xers. These programs minimize the chance that younger families will need to support their adult parents, aunts, and uncles as they age.

It is curious why this storyline and the myth of the Greedy Geezer persists. We hear over and over that the elderly and retirees are reptiles, with Social Security and Medicare falsely viewed as programs in which the "old eat the young." Dean Baker has collected some prominent examples: The Boston Globe had a story last year titled “baby boomers destroyed everything." And so does Thomas Friedman at the New York Times.

There are exceptions to journalists misunderstanding Social Security: LA Times Michael Hiltzik reminds us how many young people are lifted our of poverty because of Social Security. The Washington Post’s Allan Sloan provides a similar clear statement of reality. And Trudy Lieberman in the Columbia Journalism Review puzzles over why the press too easily accepts that the meme the elderly are having it “too good “at the expense of the younger generations.

Is Social Security too generous? Consider a modern a couple with two average earners with a combined annual income of $102,600 in 2017 dollars, drawing on excellent calculations from the Urban Institute. The projected lifetime Social Security benefits for someone turning 65 in 2015 were $624,000 compared with lifetime taxes paid of $557,000. That's an imbalance, but exactly what an insurance program expects to do. In an insurance program like Social Security, people aren't cheated. My health insurance has cost hundreds of thousands of dollars and I hope my health costs are a fraction of that.

Medicare is expensive but not because of overly generous coverage. The American health care system, including Medicare, is inefficient. Americans pay twice as much for our health care per person as other wealthy countries without superior health outcomes. We pay too much for prescription drugs and costly medical procedures. But there are political barriers to change. Polls show bipartisan support for using the muscle power of Medicare and the federal government to bargain for lower pharmacy costs. But we don't have enough elected representatives who want these changes.

Are the young opposed to secure systems for the elderly? No--young people want more security for Social Security and Medicare not less. One third of Social Security recipients are young people collecting survivor benefits or as a disabled person or dependent of disabled adult benefits for dependents. (The high number of direct recipients always surprises me, and I study this stuff for a living.) Moreover, the young are willing to pay more into Social Security -- about 73% say it is critical to preserve Social Security even if it means increasing the Social Security taxes paid by working Americans.

There are plenty of generationally fair ways to increase revenue to Social Security and Medicare. Social Security and Medicare can be maintained and expanded by increasing revenue in rather straight-forward ways. We can raise the FICA total employer and employee (split evenly) FICA tax from 12.4 to about 15 percent of payroll. Or we can raise taxes less and instead increase the earnings cap on taxable annual earnings from $132,900 to something over $250,000 or beyond.

If we don't make such simple and fair changes, then we are truly being intergenerationally irresponsible. But providing older people with decent incomes and health care does not rob younger people of their future. Instead, Social Security and Medicare, along with education and other programs for the young, help unite us across generations, making us mutually dependent on each other. That's a hallmark of a civilized and fair society.

This is not a political column, it’s a push back on the political distortion of legal and math facts about Social Security. Recently political leaders, such as the Senate leader Mitch McConnell, as Michael Hiltzik writes in the LA Times, are gunning to cut Social Security benefits to reduce the federal deficit.

But Social Security can’t, by law, add to the federal deficit. Medicare and Medicaid can, but not Social Security. Social Security is self-funded.

It is correct to say that Congress added to the deficit, not Social Security . The deficit rose substantially because of the 2017 tax cut, which reduced total revenue by 5% and revenue from corporate taxes by 35%.

And because it must balance its books, Social Security is prudently funded. It collects revenue and saves for expected costs. Currently, Social Security has a $2.8 trillion trust fund built up by the boomer generation paying more in taxes than needed to pay current benefits. The trust fund is a vital way workers save for retirement. With tax revenues and earnings and principal from the trust fund, Social Security is estimated to be solvent until 2034. After that, if it doesn’t get more revenue Social Security will only pay 77% of promised benefits. Social Security can't add to the deficit because it pays for itself. If revenue falls short, benefits are cut.

And if you are wondering if the trust fund is real, here are facts to judge yourself. Workers do two things with their FICA taxes – we pay current benefits and we save by buying U.S. treasury bonds like many wealthy people, endowments, pension funds, foreign countries, and foreign investors buy U.S. treasury bonds. U.S. treasury bonds are highly sought after by savers all around the world. For many reasons the U.S. enjoys the exorbitant privilege of having all countries consider dollars the safest currency.

When we, through Social Security, invest in government bonds, the government creates intragovernmental debt. When the Yale endowment buys the bonds the government creates external debt. And just like all trust funds when the Social Security Administration draws on the trust fund to pay its bills it sells the bonds.

The U.S. can’t practically decide to default on Social Security’s bonds or anyone else’s U.S. treasury bonds. Defaulting would "save" money for the government, but countries, like Argentina, default, not the U.S. It is hardly correct to say Social Security is "adding" to the deficit any more than any other holder of a Treasury bond. I disagree with the view that the Social Security indirectly contributes to the on-budget deficit because the interest payments it receives from the general fund are on the unified budget and receives funding from income tax revenue on Social Security benefits, which is technically on-budget.

The money you pay for Social Security through the FICA contribution is not the money you get out. You are paying mostly for the benefits of people receiving Social Security today. But for decades since 1983 workers were putting money in a "savings account” - the Social Security trust fund.

Pay attention to financial advice your financial adviser won't give you. Advisers do not emphasize that the government is a vital financial partner and partnership requires engagement. Government programs that ensure a baseline of income and health-care security insure our own household baseline security. It seems older people are getting the message; but younger not so much. Every adult eligible for Medicare and Social Security can vote, and they vote more. In the 2016 Presidential election turnout was 78% for people over age 75 and 58% for all Americans.

A key part of financial planning is understanding the roles the major government social insurance programs, Social Security, Medicare, and Medicaid will play in your later years. Consider this: they are worth almost a million dollars to a middle-income American. According to economist Eugene Steuerle and his colleagues at the Urban Institute, a single man who retires in the year 2020 after a full career earning a median wage (about $44,000) can expect to receive $536,000 in Social Security and Medicare benefits. In a couple where each spouse earned constant “average” wages over a career beginning at age 22 and retired on his or her 65th birthday would have over $1 million in health and retirement benefits. The expected benefits for couples turning 65 in 2050—age 30 today—are scheduled to rise under current law to almost $2 million.

These are stunning numbers. Our country made a commitment during the Depression to make sure that everyone and their families would be protected as they aged and if they became disabled. But national commitments don't renew themselves. Voting does.

White House economic adviser Larry Kudlow commented that “We have to be tougher on spending." Mitch McConnell just said rising federal deficits and debt is not the Republican’s fault but the deficit is caused by unwillingness to contain spending on Medicare, Medicaid and Social Security.

Here are key realities of Social Security that everyone should know:

Reality #1: Social Security is an essential form of insurance. It provides support for young families in the event of the death or disability of its breadwinners. It helps children with severe disabilities. It insures workers against old age, disability, or dying and leaving behind a survivor without adequate income. As a retirement benefit, Social Security is worth about $300,000 for the average household. Equally important, its benefits are guaranteed. In contrast, 401(k) returns are not guaranteed.

Reality #2: Social Security and Medicare benefit all workers, whether white-, pink-, or blue-collar. In 2012, 55 million Americans (out of a population of 313 million) cashed Social Security checks. These were members of all segments of society— rich and poor, left and right. Economist Moshe Milevsky makes this clear in his excellent book Your Money Milestones: A Guide to Making the 9 Most 102 Important Financial Decisions of Your Life. He writes that all households, rich and poor, have the government as an economic partner.

We all pay taxes, and we all receive benefits from it. Through our votes, we exercise some control over how that money is spent. So no matter what your political leanings are or what your tax bracket is, the government is part of your financial life and always will be. This is equally true for the corporate CEO, the small business owner, and the starving artist.

Reality #3: Social Security is on sound financial footing. In fact, it’s a lean and efficient success. In 2015, its administrative expenses (as a percentage of all Social Security spending) were less than .7%, compare that with the average 401(k), which has expenses three times as high – which can erode lifetime benefits considerably by 20-30%.

Any clear-sighted look at Social Security’s finances, free of politically motivated spin, shows that the program is in strong shape. It has a reserve fund to pay all benefits until 2034 without any change in current policy. And with some small policy changes—for instance, raising the payroll tax by 2.83 percentage points (shared between employer and employee) or eliminating the earnings cap—we could put the system in balance for the next 75 years. (The earning cap means that only wage income up to a certain ceiling is currently subject to Social Security taxes. In 2019, it will be $132,900, but that figure will rise in response to wage inflation.) We are easily poised to keep the system healthy well into the future.

The rising federal deficits will surely lead to political efforts next year to cut spending on Social Security, Medicare, and Medicaid if nothing changes. Vote.

The American workforce is an aging one, filled with people concerned about retirement. Still, despite the aging population, $140 billion in annual tax breaks, and relatively light regulation of defined contribution plans, retirement plan coverage at work (including defined benefit and 401(k)-type coverage) has declined over the last two decades. Just 40 percent of workers were covered by any type of retirement plan through their workplace in 2017, 4 percentage points lower than in 2014. And retirement plan coverage has fallen in 14 out of 17 years since 2000.

The lack of retirement plan coverage hits some groups more than others. And, though employer-provided retirement plan coverage declined for every demographic group, some groups lost more than others. The coverage rate for white (down 5 points to 43 percent), black (down 5 points to 38 percent) and Asian (down 4 points to 37 percent) workers all fell significantly. Coverage for Hispanic workers (down 1 point to 29 percent) remains lower than for other workers.

A surprising and politically important fact is that workplace retirement plan coverage fell the most for high-income workers. Coverage of workers in the top 10 percent of the income distribution (those with incomes more than $115,000) fell to 50 percent in 2017, down 10 percentage points compared to 2014. Coverage of workers in the next 40 percent of earners (between $42,000 and $115,000) fell 7 percentage points to 50 percent. Finally, just 34 percent of workers in the bottom half of the income distribution were covered by a retirement plan at work, down 4 percentage points from 2014.

Union workers’ retirement plan coverage is twice that of nonunion workers, but their 67 percent coverage rate is down 3 points and that of non-union workers is 36 percent, down 5 points. Coverage of private sector employees declined by 4 percentage points, to a low of 38 percent. The coverage rate for public sector employees was 68 percent (down 4).

Workers in information and communications jobs (42 percent, down 10) experienced the greatest decline in coverage, followed by workers in finance, insurance & real estate jobs (42 percent, down 7).

In sum, just when the labor force necessitates more retirement coverage – workers are aging, they expect to live longer, and Social Security benefits are not likely to increase – coverage falls. The 401(k) was supposed to be so popular for people and firms. The government -- relative to DB plans -- lightly regulates 401(k)-type and IRA plans and 401(k) plans are cheaper than defined benefit plans for firms. However, the voluntary system still fails to cover most workers; only 40 percent of workers are covered.

Michael Papadopolous provide research assistance for this report.

Workplace Retirement Plan Coverage of Full-Time Workers Ages 25-64

2014

2017

Full-Time Workers Ages 25-64

103,903,578

109,373,216

Coverage Rate

44%

40%

By Gender

Male

43%

39%

Female

47%

42%

By Race/Ethnicity

White non-Hispanic

48%

43%

Black non-Hispanic

43%

38%

Asian non-Hispanic

41%

37%

Hispanic

30%

29%

Other

43%

40%

Income Percentile

Bottom 50% (less than $40,000)

33%

29%

Middle 40% ($40,000 to $115,000)

57%

50%

Top 10% (greater than $115,000)

60%

50%

By Age Group

25-34

37%

34%

35-54

45%

42%

55-64

51%

44%

By Education

Less than High School

18%

14%

High School

38%

30%

Some College

44%

37%

Bachelor’s Degree

52%

44%

Graduate Degree

59%

52%

By Classification

Self-employed

14%

12%

Private Sector

42%

38%

Public Sector

72%

68%

By Firm Size

1-99 Employees

24%

21%

100-499 Employees

48%

42%

500-999 Employees

55%

48%

1000+ Employees

61%

55%

By Union Contract Coverage

Not Covered

41%

36%

Covered

70%

67%

By Industry

Construction

29%

25%

Manufacturing

49%

44%

Wholesale and Retail Trade

37%

34%

Transportation and Warehousing

43%

38%

Utilities

68%

63%

Information and Communications

52%

42%

Finance, Insurance and Real Estate

49%

42%

Professional, Scientific, Management & Administrative Services

38%

34%

Educational, Healthcare, Social & Other Services

50%

45%

Arts, Entertainment, Recreation, Accommodation & Food Services

23%

23%

Public Administration

72%

70%

By Citizenship Status

Non-Citizens

32%

30%

Citizens

47%

43%

Source and notes: Author’s calculation using the March supplement of the Current Population Survey, 2015 and 2018 and the March supplement of the Current Population Survey, 1999-2018 (survey asks about coverage in previous calendar year). Sample includes workers ages 25-64 who report having worked at least 35 hours per week. Starting in 2013, the Census Bureau changed questions related to retirement income, but not questions related to workplace retirement plan coverage. In 2013, it fielded the old questions to 5/8 of the sample and the new questions to 3/8 of the sample. We present data for retirement plan coverage in 2012 for these two samples separately. Another source found that a change in the CPS questionnaire in 2014 accounts for part the decrease seen in subsequent years (EBRI report). The direct question regarding workplace retirement plan coverage was unchanged, but other questions related to retirement income were changed. However, the trend of decreasing coverage predates the questionnaire change and alternative surveys of retirement plan coverage coverage such as the Survey of Income and Program Participation and the Survey of Consumer Finances show decreasing coverage over similar time periods. Recent data does not allow defined benefit and defined contribution plans to be analyzed separately.

The New School - Retirement Equity LabSCHWARTZ CENTER FOR ECONOMIC POLICY ANALYSIS

Indeed, Social Security needs shoring up to help solve the looming retirement crises. If we do nothing, the number of poor or near-poor people over the age of 62 will increase by 25% between 2018 and 2045, from 17.5 million to 21.8 million. And, in the next 12 years, 40% of middle-class older workers will be poor and near poor elders.

Why not just expand Social Security to solve the retirement crises? If we expanded Social Security to provide adequate retirement for the vast majority of American workers payroll taxes would rise to nearly over 25% percent of pay– up from 12.4%.

What Other Nations Do

Rarely do nations secure pensions for all workers with a just a PAYGO system. Nations that achieve widespread retirement security do so with both advanced–funded and Social Security-type pensions. France and Spain are rare cases that started out with just a PAYGO system. Their high replacement rates for the average worker -- 55% for France without taxes and transfers (70% with taxes and transfers) and 82% for Spain -- are paid for with corresponding high payroll taxes -- 37% and 28%.

To keep those tax rates from getting any larger and to scale them down, France and Spain are each developing an advanced-funded system composed of mandated hybrids between defined benefit and 401(k) type plans.

In contrast, the U.S. Social Security system taxes workers and employers 12.4% (6.2% each) which in turn pays for low benefits -- a 35% replacement rate for the average worker. If the U.S. wanted to reach a target replacement rate of 70% -- and that is what most of us need -- the payroll tax would double. (The table at the end of the article, which matches selected nations' payroll tax with their pension benefits, indicates the U.S. rate is 15% because that includes the OECD estimation of Supplementary Security Income. which is funded by general revenues).

The U.S. Needs Social Security and Pensions for All

All workers need a restoration of Social Security promised benefits – Rep. John Larson (Connecticut, D.) and others are sponsoring (Social Security 2100 Act). The bill solves the math problem that without more revenue -- an immediate increase in the Social Security payroll tax from 12.4% to 15.4%, or an elimination of the taxable earnings limit -- Social Security benefits for the median retired household will be cut by a quarter and replacement rates will fall by one-fifth in 2034. All workers and their spouses and children need Social Security’s insurance against disability, early death, and inflation -- this social insurance is the base of any retirement plan. But, though Social Security replaces about 80% of pre-retirement income for the low-wage lifelong earners and their families, it only replaces 38% of pre-retirement income for middle-class workers and less than 20% of pre-retirement income for the top 10%.

It should be obvious by now that despite our aspirations to balance our retirement income by getting funds from a number of sources, the U.S. system is no three-legged stool – only the highest income retirees get a third of their retirement income from Social Security, a third from pensions, and a third from assets. The bottom 40% of Americans over age 65 receive over 90% of their retirement income from the PAYGO Social Security system. Those in the top-half of the income distribution get a smaller share of retirement income from Social Security – an average monthly benefit of about $1,500 – and need more to maintain their standard of living. But nearly half of Americans are not covered by a workplace plan.

Everyone needs an option to the crumbling 401(k) and IRA system and more than anything now proposed in Congress. Workers need Social Security and pensions, so that investment earnings, and not just tax revenue from younger workers, pay their pensions when the times comes to retire.

Because a blend of PAYGO and advanced-funded plans is more efficient, meaning administrative costs and risks are smaller, a large government plan can manage economic and demographic shocks better than a pure PAYGO system or a totally capitalized system. Nobel prize winner Peter Diamond and Nicholas Barr make this point. Households can fund their retirement more cheaply with a combination of regulated add-on pension accounts and Social Security. An improved U.S. retirement system would mandate contributions, professionally-manage investments, and pay out annuities. Even those with access to retirement plans have little saved and face contribution and investment risk and concerns about how the money will last a lifetime. Tony James and I have a plan to supplement Social Security called the Guaranteed Retirement Accounts (GRA). GRAs work in concert with Social Security.

Bottom line: Why not just expand Social Security as our retirement system fails? If we expanded Social Security to provide replacement rates of 75-80% for most workers payroll taxes would rise to over 25% of pay and we would lose the potential efficiencies of advanced-funded retirement plans.

The tax rate for Social Security (old age survivors and disability insurance OASDI) is 6.4 percent for both the employer and employee and is paid on earnings up to a cap, which will be $132,900 in 2019. Based on Social Security’s handy wage data in “Wage Statistics” -- it is a fascinating table -- did you know out of the 165 million wage earners only 205 earn over $50 million a year and report an average earnings of exactly $97,338,760.37? I estimate if we expanded Social Security to provide replacement rates of 75-80% for the 75% of American workers who earn between $10,000 per year and $140,000 per year, payroll taxes would rise to to 25% of pay– up from 12.4% and more if the retiree cohort is much bigger than the working cohort. I only examine the tax rate needed to raise the replacement rate from an average of 34% to 70% for the middle 75% of earners because I assume the bottom 21% of earners who earn an average $5000 a year need public assistance and the top 5 percent who earn over $135,000 will use personal assets for retirement.

Teresa Ghilarducci is a labor economist and nationally-recognized expert in retirement security. She is the Bernard L. and Irene Schwartz professor of economics at The New School for Social Research and the Director of the Schwartz Center for Economic Policy Analysis (SCEPA) and The New School’s Retirement Equity Lab (ReLab).

New York Times

The New York Times named Teresa Ghilarducci's pension reform proposal one of the defining ideas of 2008.

Bipartisan Policy Commission

Ghilarducci is an honored member of the Bipartisan Policy Commission on Retirement Security and Personal Savings.

Time Magazine

"Ghilarducci has always had more interesting - and more controversial - things to say than your average retirement-policy wonk."- Justin Fox